Paragraph of the day!

Image Credit: PC Museum

Image Credit: PC Museum

Complementers, however, always run the risk that Microsoft will incorporate the unctions contained in their software into its own products, either by internal development or by acquiring the technology in a takeover.  Merger talks between Novell and Microsoft in 1990 fell through.  Microsoft subsequently introduced networking capabilities into its operating systems in the early 990s, thereby entering into intense competition with Novell.  On the other hand, in the case of Norton Utilities, Microsoft has shown the tolerance of an elephant for the tikka bird on its back, allowing Peter Norton Computing "deep into the innards of the operating system" and fostering "tremendous personal relationships between their development teams."  This is probably because Norton Utilities complement Microsoft's operation g systems, adding to their value--by providing anti-virus facilities, for example--in a way that Microsoft's relatively bureaucratic development processes would find difficult or uneconomical. 

--Martin Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry (pg 260).

Integrated Circuits, City Planning and Book Printing

CC Image courtesy of james4765 on Flickr.

Modern integrated circuits, when examined under a microscope, look like the plan of a large, futuristic metropolis. The analogy with architectural design or city planning is appropriate when describing chip design and layout. Chips manage the flow of power, signals and heat just as cities handle the flow of people, goods, and energy. A more illuminating analogy is with printing, especially printing by photographic methods. Modern integrated circuits are inexpensive for the same reason that a paperback book is inexpensive--the material is cheap and they can be mass produced. They store a lot of information in a small volume just as microfilm does. Historically, the relationship between printing, photography and microelectronics has been a close one.

Paul Ceruzzi, A History of Modern Computing

Policy vs. Politics: A Close Reading of Timothy Geithner's tightrope walking exit interview as a case of "boundary work"

In Science and Technology Studies (STS), the sociologist Thomas Gieryn has a concept that he calls boundary work.  Boundary work is the work of defining what constitutes science, of deciding on the boundary between science and pseudo-science (or non-science), or that between science and politics, or between science and religion, among others.  This work is done not in laboratories but in public debates, and often not by scientists, but by others: "journalists, bureaucrats and lawyers" (not to mention philosophers!).   In other words, boundary work is about the consumption and circulation of science.  Gieryn's is explicitly a constructivist stance.  He takes for granted that the boundary between science and non-science is made rather than found; is pragmatic rather than conceptual; and takes a good deal of work to police and maintain--a stance that is the foundation of STS.

In this blog-post, I am interested in a similar kind of boundary work w.r.t. "politics" that happens in American public culture (which builds on the pre-existing boundary work w.r.t. science).  The boundary work in public life then consists of establishing that something--a course of action, a guiding principle--is "policy" and not just "politics."  "Policy," here, is seen as the opposite of politics: a rational technocratic exercise where a group of skilled people sit down and solve problems.   Policy-making obviously gains its legitimacy from its similarity to doing science and from science's cultural authority, in particular, its image as rational, skeptical, and as being about facts rather than values. Since it is governments that do policy, and governments are almost always seen as political,  how might one separate policy from politics--and that too, using the cultural authority of science?  I would say that it is done by seeing policy-making as "solving problems" rather than, say, resolving conflicts between opposing interest-groups.

 An almost perfect illustration of this is Timothy Geithner's "exit" interview with the New Republic's Liaquat Ahamed.  Like everyone else, I was excited to read it.  What would Geithner say about the financial crisis which he inherited from Hank Paulson (although he was already a player in it as the head of the New York Fed), and which he--at least in some sense--brought to a close? That he chose not to talk about the juicy times of his tenure will surprise no one [1].  What was interesting about the interview though was the way he used the occasion to perform boundary work.: his own work, he insisted, was about policy-making, not "politics"; his job was to "fix the problem" at hand (the financial crisis, that is).  He was lucky, he claims, that President Obama is also a policy-maker President, who sees his advisers as offering policy advice that is not based on political expediency. 

In the next few paragraphs, I'm going to do a Wittgenstenian analysis of how Geithner uses the terms "policy" and "politics" respectively to show the kind of boundary work that is being done.  In response to a question from Ahamed on whether he "saved the economy, [and] lost the public," Geithner says:

I think that’s a great question. I think it’s hard for any of us to know. My own view was that it was going to be very hard, if not impossible to design a financial rescue that was going to be effective in protecting all the innocent victims hit by the crisis and still satisfy the completely understandable public desire for justice and accountability. Those things were in direct and tragic tension, never resolvable at that time. I always felt that the only preoccupation for people in policy at the time should be to fix the problem as quickly as we could, as effectively as we could, and only after that would other things be possible, including how to figure out not just how to clean up the mess, but reform the financial system.  [my emphasis.]

Public desire for justice and accountability is "understandable," says Geithner, but "the only preoccupation for people in policy at the time should be to fix the problem as quickly as we could."  Immediately, a distinction is made between "people in policy" whose task is seen as "fix[ing] problem[s]," and the "public" that wants "accountability."

In answering the next question, which was about his working relationship with President Obama, Geithner makes his point even more explicitly.  The President, he says approvingly, is interested in policy, not politics.

I always had the sense that he was going to put policy ahead of politics. And he always made it clear to people working for him that our job was to inform him of what the relative merits were of the policy choices, not to try to do the politics for him, or to limit our prescriptions by what was politically expedient. I think the country was very lucky because as you know, there have been lots of other examples in other countries, and certainly in our history, where the leaders of the country were much more reluctant to put politics aside and take the sting of a more decisive resolution. I’ve talked about this before, but I think that what really distinguishes countries in crisis are those that are lucky enough to have political leaders who are willing to take the brutal political cost of doing what’s necessary and those countries that waited and let the populist fires burn, or decided they were going to try to teach people a lesson and put populism ahead of other things. Those countries had far worse experiences in crisis than we had.    [my emphasis]. 

Politics here is identified with the messy, grubby business of getting votes.  And political costs are just that: electoral defeats.  Good "policy" can lead to electoral defeats, and President Obama, Geithner says, did not put politics first (meaning electoral victory), unlike a lot of other world leaders.   Or, to put it in a rather crude pictorial version:

The interview moves on to other things.  When asked what the most frustrating part of being the Treasury Secretary presiding over the financial crisis, Geithner says:

The most frustrating part of this work, but in some ways it’s the most consequential, is how effective you can be in relaxing the political constraints that exist on policy. You can see that most compellingly now in the fiscal debate. Paulson before us and the President were very successful during the crisis in getting a very substantial amount of essential authority essential to resolving the crisis. But it has been very hard since then to get out of the American political system more room for maneuver both on near-term support for the economy, as well as reforms that would lock in a sustainable fiscal path. That is the most frustrating thing, to get the political system to embrace better policies for the country.    [my emphasis]. 

On close analysis, we see that the politics/policy distinction is now no longer about winning elections versus crafting solutions.  The "fiscal debate" is about whether the Federal Government needs to boost spending in order to counteract the effects of the recession and boost employment.  But funding appropriations are done through Congress which has no stomach for more spending (preferring instead to concentrate on deficits).  Politics and policy now become separated by the different arms of government.  Congress, playing "politics,"--that is, concerned with re-election--denies the President the policy levers (fiscal stimulus, monetary expansion) that he can use to combat the recession. 

This is only bolstered when Geithner includes President Bush's team as part of an all-inclusive "we" who dealt with the crisis as policy-makers should.  As opposed to Congress, that is, which is clearly not part of the "we."  This also helps Geithner use the word "bipartisan"--which carries great currency in American political debate today.

I really believe that given the choices we had at the time, with the authority we had and the options available to us, that we did a very effective job. And by “we,” I mean in many ways this was a bipartisan response across two administrations that will look good against the comparison of what we know about other crises of this magnitude.

Then things get interesting.  Ahamed asks Geithner what his views on austerity are; was he, Geithner, responsible for the shift in the President's focus from fiscal stimulus to debt reduction?

TG: It was definitely my view, and it still is, that our ability to get more growth-promoting policies out of the Congress is contingent on our ability to put in place long-term fiscal reforms that restore sustainability. That’s true for lots of different reasons. It’s true not just because, without action, the natural dynamics of demography and healthcare costs would crowd out a whole range of investments over time. But it’s also true the average person, facing deficits this large, is just uneasy supporting substantial additional growth-relevant fiscal policy without that framework. So that’s the main reason why I was a supporter of trying to make a more credible commitment to some gradually phased-in, sensibly designed restraints over time. I think without that, there was no way we were going to be able to make the case for a big long-term infrastructure program.  [my emphasis.]

And then, suddenly, everything gets unscrambled here (on close reading, that is).  The President's policy-making--his ability to bring the economy back from high unemployment and low growth--is seen as constrained, not just because Congress is a grubby, political machine, intent on re-election, but because Congress needs to be convinced of "our ability to put in place long-term fiscal reforms that restore sustainability." And then, that staple of politics proper is brought in: "the average person."  "It’s also true," says Geithner, that "the average person, facing deficits this large, is just uneasy supporting substantial additional growth-relevant fiscal policy without that framework."  Who is this average person?  Does he stand for a member of the Congress?  Or does he stand for the public that each Congressman acts as a spokesman for? 

It's unclear, which, I think, is the point.  And note that the word "politics" doesn't appear at all in this quote, precisely (I think) because Geithner is talking about politics.  Not politics as grubby vote-getting, but rather, politics, as a mechanism of reconciling different sets of values and priorities.  And while that idea is present in his remarks ("without that ... no way we were ... able to make the case for"), he does not call it politics.  With his references to the "average person," Geithner brings in the imagined public in whose name the US Government acts.  And he suggests that policies of fiscal expansion need their stamp of approval from this public, and setting out a plan for the deficit is one way of securing this.  The refusal to use the word "politics" to describe this, and the use of the imagined public of "average person(s)" to legitimate his own policy, suggests, again, that this is an instance of boundary work. 

Why is this at all important?  As I suggested before, in public life, it is often easier to argue over facts, rather than values.  The use of numbers--risk analysis, what have you--in public life, as Theodore Porter suggests, accomplishes precisely this purpose.  The US Army engineers used the language of cost-benefit analysis (of public projects) to make their decisions seem more rational, and less political.  And while it has its advantages, and permits a certain kind of discussion, the use of mathematical cost-benefit analysis doesn't make a political decision less political; it simply puts the values into the background.

Sometimes--many times--it's useful to put values in the background and talk about facts and methods.  At others--and the financial crisis, it seems to me, is a key candidate for this--it's probably better to bring the values into the foreground, with the facts and the methods.  And that's why Tim Geithner's boundary work is important. 

------

[1]  The interview itself was guarded.  Geithner didn't say much about the conflicts within the Administration over the appropriate response to the Great Recession (fiscal stimulus vs. austerity?  bank nationalization vs. capitalization?  and so on).  He seemed to indicate that the route the Administration had taken--TARP, recapitalization, Fed lending, stress tests--had worked pretty well, under the circumstances.  And he ended on this chilling (but quite appropriate, I should think, for a regulator) about the inevitability of financial crises:

I think there’s something about human beings, and something about financial systems, where people tend to give less weight to the risk of an extreme event. So after a long period of relative stability, like we had in the U.S. and the world economy in the decade before this, that leads people to take on more risk than they should, borrow more than they should, and that’s what creates the vulnerability to crisis.

The things we did in this crisis, and certainly the things we did in financial reform, will significantly reduce the probability and the intensity of crises for a long period of time. Because there’s much more capital in the financial system. We did a pretty brutal restructuring of our financial system as a part of the crisis response. I know that markets over time will find their way around those things, and memories will fade. But if we’re lucky that will take a long time.   

And Geithner appears surprised at the finance community's rather fierce response to the teeny-weeny bit of class war rhetoric that President Obama used in his public addresses.

I’m biased but I felt that in the basic strategy that the President embraced and that we put into effect, we did something that was incredibly effective for the broad interest of the economy and the financial system. I feel the President’s rhetoric over that period of time was very moderate relative to the populist rage sweeping across the country. And I never quite understood why the financial community took such offense at what was such moderate rhetoric relative to what we have seen in other periods in history.

Things I learnt from Thomas Laqueur's long essay on the Titanic

Things I learnt from Thomas Laqueur's long essay on the Titanic in the London Review of Books.

(a) Harvard's massive, massive, Wiedner library owes its existence to the sinking of the Titanic. 

Bernard Quaritch Ltd, the rare book dealers, underwrote the publication of Titanic Calling, because they too had a connection with the ship. The American bookseller A.S.W. Rosenbach had sent a message to the son of the firm’s founder within days of the sinking, informing him that one of their best customers, Harry Elkins Widener, had died: ‘Harry Widener and Father Lost, Titanic. Mrs Saved.’ Quaritch posthumously purchased 18 lots on Harry’s behalf in 1912 and his mother continued to buy books from both firms to build up her dead son’s collections. They in turn became the nidus of the great Harry Elkins Widener Memorial Library at Harvard, which she endowed in honour of her dead son. Harry died clutching a 1598 copy of Francis Bacon’s Essaies that he had loved too much to trust to the post and took with him on the boat.

(b) The Titanic's second and third-class sections were not that bad.

What the White Star Line lost in speed it made up in amenities. If First Class was the Ritz, Second Class was a Lyons Corner House: warm, comfortable, solidly bourgeois, at the higher end not much less expensive than modest First Class. And Third Class was more than fine. It was spread over four decks and not, as was usual, confined to the waterline. The public rooms were whitewashed pine; sofas were teak. There was a bunkroom for the lowest-paying passengers but there were two and three-berth cabins for those paying a bit more; there were showers for everyone, almost unheard of on other ships. There were lavatories, not open trenches. The dining room had chairs instead of benches. Food was good and plentiful, kosher for Jewish customers. The most expensive suite (£512) cost almost eighty times more than the lowest third-class ticket, but the median first-class fare was only eight times the median fare in third, smaller than the difference between a first and an economy air ticket from London to New York today.

(c) The fact that many more women survived the disaster than men (because of the "women and children first" rule) was often used to discredit the suffragist movement.

The reason for gender disparities is clear. Broadly speaking, men died in disproportionate numbers as the price of patriarchy. Their chivalry, their adherence to a masculine code of honour, demonstrated to the establishment on both sides of the Atlantic how deeply in error feminism and particularly the women’s suffrage movement really was.

Davenport-Hines quotes Churchill’s letter to his wife: ‘The strict observance of the great traditions of the sea towards women and children reflects nothing but honour upon our civilisation.’ And he hoped it would set right ‘some of the young unmarried lady teachers’ – aka suffragettes – ‘who are so bitter in their sex antagonism and think men so base and vile’. That view was widespread. ‘When a woman talks women’s rights, she should be answered with the word Titanic, nothing more – just Titanic,’ a correspondent in the St Louis Post-Dispatch observed. Emma Goldman thought suffrage had been dealt a blow by the Titanic: woman ‘continues to be as weak and dependent, as ready to accept man’s tribute in time of safety and his sacrifice in time of danger, as if she were still in her baby age’. She praised the toilers and drones of the ship, its crew, braver than soldiers on the battlefield. But even among them gender played its part: 87 per cent of women crew members survived, 22 per cent of men. Emmeline Pankhurst claimed that ‘women and children first’ was simply a rule and that the sinking of the Titanic proved nothing about chivalry or suffrage.

On board the ship Edwardian codes of masculinity were on occasion enforced with insane zealotry. Second Officer Charles Lightoller, the most senior survivor of the crew, interpreted the captain’s orders, ‘women and children first’, to mean women and children first and only. No men. He forced boys as young as 11 out of boats. (Lightoller ended up in the freezing water and was miraculously rescued by a last blast of hot air from an air shaft, which put him near a boat that rescued him.) He told an inquiry that he was defending what he took to be a law of nature, that men deferred to women at times of supreme danger. Nothing impressed one correspondent more ‘than the admiration expressed by the women for the men who sacrificed their lives in order that the women might escape’. Men on the starboard side fared better because First Officer William Murdoch interpreted the order to mean that men could board if no women and children were waiting for a place. And some men – most important, some lowly crew members and strong labourers among the passengers – sneaked onto boats on the port side when Lightoller was turned away. This was a good thing, because they were able to row the boats away from the sinking ship.

(d) The statistical open-source software package R comes with an exhaustive Titanic data set. 

Immigration, economic numbers and the politics of culture

I usually don't write about US politics on this blog but sometimes it helps illustrate some interesting points about the role of science in public life.

Immigration reform is now on the agenda of the US Congress.  In response, Matt Yglesias (using a chart that illutrates the results of two econometric analyses, see above) writes today that:

Unfortunately, immigration scolds seem to be excessively afraid to voice their real concerns about this, which makes it difficult to address them with either evidence or policy concessions. Instead, we're stuck in a mostly phony argument about wages that does nothing to ease people's real fears about nationalism and identity.

A set of interesting claims is being put forward here, and if I understand it right, a rather strange use of Marx's ideas about the base and superstructure.  For Marx, the base was economic relations and the relationship of the different groups of people to the means of production.  The superstructure was culture; this was seen as deriving from the economic structure, and often served to reproduce this base (through what Marx called false consciousness and ideology). Implicit in Yglesias' assertion is that the effect of immigration on wages uncovered by econometricians corresponds in some sense to what a certain set of Americans feels.  A cumulatively economic effect of immigration on wages that can be uncovered only through the efforts of econometricians is seen as an objective measure (in Theodore Porter's sense) that maps onto the subjective states of people who oppose immigration.  Unfortunately, the econometricians find low or negligible effect, therefore people who oppose immigration must be lying: their reasons are cultural--about nationalism and identity--rather than economic.  We would have a better, more honest discussion, he suggests, if this sham of economic impact (expressed through numbers) was let go of and concentrated on the cultural fears. 

Something similar happened a few days ago but in a different context.  Blogger wunderkind Ross Douthat wrote an op-ed in the Times arguing that that the United States had low fertility rates, which he argued was a problem that the Government needed to think about and perhaps mitigate using policy measures (primarily by creating a "more secure economic foundation" for working-class Americans).  He concluded--omniously--by saying that policy measures could only be effective to a point; low fertility rates were a symptom of "decadence":

The retreat from child rearing is, at some level, a symptom of late-modern exhaustion — a decadence that first arose in the West but now haunts rich societies around the globe. It’s a spirit that privileges the present over the future, chooses stagnation over innovation, prefers what already exists over what might be. It embraces the comforts and pleasures of modernity, while shrugging off the basic sacrifices that built our civilization in the first place.

Such decadence need not be permanent, but neither can it be undone by political willpower alone. It can only be reversed by the slow accumulation of individual choices, which is how all social and cultural recoveries are ultimately made.

To which Matt responded, (calling this last paragraph "nutty")

It'd be a much better country if social conservatives would stop writing things like that second paragraph and focus instead on what's in the first paragraph.

 There was some predictable back-and-forth (see also this).  But his point was clear: it was far better to talk about policy levers--about which a debate can be had--than about notions of "decadence" about which debates are never possible, particularly if you don't subscribe to such notions.

All of which makes me thing that Porter is right on this.  Numbers are indeed "technologies of trust."  At least in the American context, they allow arguments about public life to be made; they make possible arguments that are about objective "facts" rather than subjective "values."  Not that arguments about facts are guaranteed to be settled, but arguments can indeed be made.  Whereas arguments over whether the late modern age is "decadent" or not, between people with incommensurate values, are guaranteed to go nowhere.

Which brings me back to the original post I began this discussion with where Yglesias suggests that it is better to have a national American conversation about the cultural anxieties of immigration (I suspect it would turn out to be equally "nutty").  Kevin Drum responds: 

Cultural insecurity and language angst are the key issues here. It doesn't matter if they're rational or not. Anything we can do to relieve those anxieties helps the cause of comprehensive immigration reform.

A public conversation to relieve cultural anxieties--would it have to take the form of numbers?  What other forms could it take--and where would it lead? 

Gillian Tett, Meet William Cronon

On my way back from India, I read Gillian Tett's "Fool's Gold: The Inside Story of J.P. Morgan and How Wall St Greed Corrupted Its Bold Dream and Created a Financial Catastrophe."  [The book's changing subtitles is a topic in itself!]  That awkward subtitle is perfect for the book's quite strange structure.  Tett wants to tell the story of how credit derivatives began (with J.P. Morgan's invention of the BISTRO instrument) but that's not the story her readers will be mostly interested in (that would be the financial crisis).  So she tells the story of the invention of credit derivatives, and then quickly segues into the story of the financial crisis, the prime culprit of which was the use of credit derivative instruments to home mortgages.  The problem is that J.P. Morgan was not a part of this second trend; other banks, however, plunged in with relish, with consequences that we all know about.  Which puts Tett in the strange position that she tells the story from J.P. Morgan's point of view, when all the real action was happening somewhere else.  
 

But no matter.  All that said, Fool's Gold is the best book I've read about the crisis. (To be fair, I've only read three others.)  First, it's about the invention of credit default swaps (CDS), rather than simply mortgage-backed securities (which, if I understand Tett right, were benign instruments dating back to the 1970s).  Second, she gives a really good account of why credit derivatives were invented, and consequently what the "shadow banking" sector is all about.  Moreover, her account convinced me that contrary to what the J.P. Morgan bankers say, the invention of the credit derivative was the key to the financial crisis, not so much because of the instrument itself, but for the reasons for which it was invented.    

Let me explain.  Essentially, the J.P. Morgan bankers invented the CDS to circumvent Basel regulations about capital requirements.  Basel rules required that banks keep a certain amount of liquidity to insulate them from bank runs in the case that their clients default on their loans; this liquidity requirement is in direct proportion to the "risk" that the bank has taken on.  J.P. Morgan's clients tended to be blue-chip corporations, and the risk of default was therefore minimal.  Basel regulations were hindrances that prevented Morgan from making more profits; therefore they had to be subverted.  Morgan accomplished this by creating the swap, it insured the riskiest part of its loans, and thereby shifted the risk off its books.  This meant they required lower liquidity, and could invest the money into higher profits.  (A CDS is a contract the bank makes with another party: the bank pays the party a steady fee in return for which the party agrees to insure the bank in the case of default.)  

Morgan's key innovation, as Tett documents, was that it was able to standardize the credit default swap.  Rather than the slow process whereby the two parties for a CDS contract needed to be found, the Morgan bankers found a way to mass-produce these instruments: their solution was "tranching."  All the loans on the books were bundled together, and separated into portions with different risks.  A key part of this was that the amount of risk needed to be standardized so that the parties to the CDS contract would know exactly the kind of debt that was being insured.  Enter the ratings agencies which were only too happy to do this: for a nice juicy fee, they looked at the debt, applied their models to it and estimated the amount of risk, which they then standardized into levels or tranches.  AAA was the least likely to default, BB was a little more likely and so on.  This worked out well for corporate loans, which could be diversified, but not so well for home mortgages.

 

Reading Tett's account of the invention of BISTRO took me back to William Cronon's story of the grain trade in Nature's Metropolis.  Cronon begins by describing how the grain trade worked prior to the railroads.  The grain would be stored in sacks, and transported manually (across the river and across Lake Michigan) by the traders (who were usually small shop-keepers), who would then sell it in other cities.  The sack in which the grain was stored was crucial to its transportation: it changed boats multiple times during its journey and the sacks of each seller were kept separate.  It was also the key to its exchange value: the grain was examined by a buyer, a mutual price decided on based on the quality of the grain, and then sold.   

The building of the railroads changed this.  Because railroads were built privately, and had a great capital cost, they concentrated on maximizing the shipment of goods from the hinterland to the city (and they could even operate in the winter!).  This meant a rapid turnover – quickly emptying a carriage so that it could be used again for a different trip – and the sack of grains became an obstacle to this.  The railroads solved it by the invention of the steam-powered grain elevator which made the loading of grains from warehouses into the railway cars easy and efficient.  The problem was that there was no room for sacks of grain in this scheme; to maximize profit, all the bins in the elevator needed to be filled with grain, therefore grain from different farmers had to be mixed.  Thus the first step in the chain of standardization took place: the local merchant (or even farmer) was separated from the grain he produced.  

Yet, mixing the grains from different farmers together needed one further step: the creation of different "grades" of grain so that even if mixed together, its price could still be determined.  The Chicago Board of Trade, formed in 1848 and whose membership consisted of Chicago grain traders came up with such a classification and over time, this classification started to be widely used.  Thus a further distancing of the grain from its trade took place.  Traders no longer had to sell grains physically.  Instead an elevator receipt – which showed that a certain quantity of a certain kind of grain had been sold – could itself be traded amongst traders.  The receipt could be used to buy grain from a warehouse but this was not the grain that was actually sold; instead, it was a functionally equivalent substitute.

A final step was the role of the telegraph in setting the prices of grain.  The telegraph allowed communication between, say, Chicago and New York markets, which meant that the price of grain in New York markets could affect Chicago's.  The standardization of the grain also helped here: it was no longer necessary for a buyer in New York to manually inspect the grain that he was being sold; instead he would know of its quality because it had been "rated" as being of a certain category.      

    

All of these trends – the standardization of the grain into grades, its effective separation from the particulars of its production i.e. its commoditization, and the fact that it was now easy for buyers and sellers to make contracts over long distances – culminated in large volumes in futures trades of grains and sometimes led to “Corners,” artificial shortages created by speculators.  Cronon sees the increase in the grain trade due to standardization as responsible for the change in the landscape around Chicago.  

I will stop here, but the parallels between the grain trade and the derivatives trade are clear.  Just as the grain becomes effectively separated from its producer, the loan issued by the bank became separated from the party that the loan was given to.  And just as the grains of farmers were now mixed together in standardized bins of different "grades" of grain, so also debt from different parties was mixed together and labeled along a standardized spectrum of risks.  And this standardization helped along a further trade in these instruments themselves... Cronon calls this the "logic of capital."  And so it is.  But the commoditization of the grain trade grew from the railroads' insistence on maximizing turnover: this was the only way they saw of making profits to offset their high capital costs.  The banks too wanted higher profits, but their obstacle was not the movement of goods but capital regulations.  Credit derivatives, it is very clear from Tett's story, were created to make a run around regulations.    

All of which is not to say that standardization is a bad thing, per se.  But rather to say that standards need regulators.  When the standardization doesn't work, when the standards stop reflecting what's "inside," then we all pay a price. 

Is the neo-Darwinian synthesis intuitive?

In a sober [1], concise, careful and clear review of Thomas Nagel's Mind and Cosmos, H. Allen Orr quotes a lengthy passage from the book which serves to ground Nagel's subsequent arguments against neo-Darwinism in favor of a "teleological" model: 

I would like to defend the untutored reaction of incredulity to the reductionist neo-Darwinian account of the origin and evolution of life. It is prima facie highly implausible that life as we know it is the result of a sequence of physical accidents together with the mechanism of natural selection. We are expected to abandon this naïve response, not in favor of a fully worked out physical/chemical explanation but in favor of an alternative that is really a schema for explanation, supported by some examples. What is lacking, to my knowledge, is a credible argument that the story has a nonnegligible probability of being true. There are two questions. First, given what is known about the chemical basis of biology and genetics, what is the likelihood that self-reproducing life forms should have come into existence spontaneously on the early earth, solely through the operation of the laws of physics and chemistry? The second question is about the sources of variation in the evolutionary process that was set in motion once life began: In the available geological time since the first life forms appeared on earth, what is the likelihood that, as a result of physical accident, a sequence of viable genetic mutations should have occurred that was sufficient to permit natural selection to produce the organisms that actually exist?  [my emphasis]. 

I think there is something to this.  Not because I think Nagel's right; Orr's review disposes off his objections quite convincingly.  But there is something non-intuitive about the neo-Darwinist synthesis.  A simple mixture of random mutations and natural selection that leads to mammals?  Creatures with complicated mechanisms like eyes, an immune system, a circulatory system (and elaborate processes of clotting and repair!) and on and on -- how on earth could all of that arise randomly?

 I felt like this for a while.  Obviously not badly enough that I became a creationist or anything.  But it was puzzling.  What solved it for me was reading the first few chapters of Daniel Dennett's book Darwin's Dangerous Idea: Evolution and the Meanings of Life.  Dennett thinks that natural selection is actually (or like, sometimes the distinction is unclear) an algorithm. "Darwin had discovered the power of the algorithm"  (p. 50).  Evolution was not designed to produce us per se, he says, but there's no reason to believe that it is an algorithmic process that has in fact ended up producing us. 

To illustrate his point, Dennett gives us this nifty little diagram.  Think of what natural selection does, he says, as an example of a tennis tournament draw.  Whatever happens, a tournament has to have a winner!  And natural selection picks winners; there is nothing inevitable about these winners -- they are contingent -- but the process of picking winners is inexorable.  And this happens over long, long, periods of time -- millions and millions of years. 

So first, you have an algorithm that picks a winner.  And then you have an algorithm that picks winners over large time-scales.  That nailed it for me.  As a programmer, you are constantly faced with time and space constraints when you program. Think about writing a program to play chess where the program essentially tries to look as far ahead as it can.  How far down the tree of moves should the computer look?  Ideally -- all the way down!  But wait - then it'll take forever for the program to make the next move, so we need to compromise.  Or maybe we can store everything in the memory all at once so that it won't take forever?  No luck again because memory is limited. 

When you work with programs, the power of algorithms is evident.  And the constraints on algorithms are all too visible.  Evolution then is like an algorithm with no constraints; it gets infinite time and infinite space to do its work.  And for something like that, anything is possible -- mammals, conscious mammals, insects, plants, whatever.  It doesn't seem non-intuitive at all.

Now obviously, there's a lot of flimflammery to Dennett's thesis.  Is evolution actually an algorithm?  Or is it like an algorithm?  And Dennett clearly has a lot more up his sleeve: his point is not to make evolution intuitive (that was a byproduct for me; not everyone works with algorithms), but rather to show that evolution is indeed something like "universal acid" -- a concept that can explain the deepest philosophical mysteries: the mind-body problem, consciousness and so on.  Critics, quite rightly, beg to differ.

No matter.  My point was to show that there are ways in which natural selection's workings can be made to seem entirely intuitively.  The trick is to find the metaphor that works for you. 

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Endnotes:

1. I use the word sober for a special reason.  You would think Orr would have more in common with Daniel Dennett who at least is not rejecting the neo-Darwinian synthesis like Nagel is (by starting with doubts from intuition).  (In fact, one might argue that Dennett assigns it far too much significance.)    But while Orr's review of Nagel is scrupulously respectful, his review of  Darwin's Dangerous Idea, the book that's the subject of this blog-post, is quite scathing.  His correspondence with Dennett is even more so.  (Dennett doesn't get much love at the New York Review of Books.)